Concurrent Causes of Loss: Will Insurers Finally Catch a Break? Recent Ruling Sheds Light on Anti-Concurrent Clauses

In 2016, the Florida Supreme Court drastically impacted the property insurance industry as a result of its decision in Sebo v. American Home Assurance Co., Inc., 208 So.3d 694 (Fla. 2016). The court’s ruling essentially expanded the scope of coverage for insureds when combined perils—both excluded and covered—create one loss.

After partial denial of his property loss claim, John Sebo filed suit against his insurance carrier, American Home Assurance Company, seeking a declaration that coverage was, in fact, afforded under his “all risks” policy of insurance for his property loss that resulted from the intrusion of rainwater caused by design defect, construction defect, as well as wind and rain caused by Hurricane Wilma. The overarching issue for the court as it related to the facts centered around determining the proper legal doctrine of relief when more than one peril causes a loss: the Efficient Proximate Cause Doctrine or the Concurrent Cause Doctrine.

The Efficient Proximate Cause doctrine states that, where there is a concurrence of different perils, the efficient cause—the one that set the other in motion—is the cause to which the loss is attributable. Sabella v. Nat’l Union Fire Ins. Co., 377 P.2d 889, 892 (Cal. 1963); Fire Ass’n of Phila. v. Evansville Brewing Ass’n, 75 So. 196 (Fla. 1917). In other words, the Efficient Proximate Cause Doctrine is utilized when multiple perils act together to cause one loss and the covered loss acts as the catalyst, or “efficient cause,” to the other potentially non-covered loss. In such an instance, the loss will be covered.

The Concurrent Cause Doctrine is much more broad in that coverage may still be afforded regardless of whether there is an “efficient” cause that “sets the other in motion.” In essence, as it relates to the Concurrent Cause Doctrine, if one of the contributing perils to a loss is covered and one (or more) is/are specifically excluded pursuant to the terms of the policy, coverage can exist.

In Sebo, the trial court found in favor of the insured, ruling that the Concurrent Cause Doctrine was applicable to the facts before the court; therefore, coverage was afforded. On appeal, the Second District Court of Appeal disagreed with the trial court’s determination that the Concurrent Cause Doctrine applied, instead ruling that, the Efficient Proximate Cause Doctrine applied, which would then favor the insurer. Accordingly, the decision was reversed, and the matter was remanded for further review.

The Florida Supreme Court, in reviewing the Second District’s decision, considered whether the Second District’s ruling departed from the ruling set forth in Wallach v. Rosenberg, 527 So.2d 1386 (Fla. 3d DCA 1988). Ultimately, the Supreme Court found that the Second District Court indeed departed from the rule provided in Wallach, which applied the Concurrent Cause Doctrine with facts similar to those presented in Sebo. The Supreme Court found that coverage may exist when there are concurrent causes of a loss, so long as one cause is, in fact, covered under the policy.

The court explained that Mr. Sebo’s “all-risk” policy specifically excluded damage resulting from construction defects, however, rain and wind damage was expressly covered. Accordingly, the “rain and construction defects acted in concert to create the destruction of Sebo’s home. As such, it would not be feasible to apply the Efficient Proximate Cause Doctrine because no efficient cause can be determined.” Instead, the court was faced with considering multiple distinct causes of losses. The court found that “[w]hen independent perils converge and no single cause can be considered the sole or proximate cause, it is appropriate to apply the Concurrent Cause Doctrine.”

In determining the most sufficient legal doctrine to use, the Florida Supreme Court specifically considered and addressed the Second District’s reasoning behind its decision to remand the case in order for the Efficient Proximate Cause Doctrine to be applied. The Second District explained that “a covered peril can usually be found somewhere in the chain of causation, and to apply the concurrent causation analysis would effectively nullify all exclusions in an all-risk policy.”

The Florida Supreme Court, however, disagreed and in doing so emphasized the importance of relying on unambiguous policy language, indicating that in order to determine whether coverage exists, the plain language of the policy must be considered. The court ruled that, “because AHAC explicitly wrote other sections of Sebo’s policy to avoid applying the Concurrent Cause Doctrine. Because AHAC did not explicitly avoid applying the CCD, we find that the plain language of the policy did not preclude recovery.” Luckily, the Florida Supreme Court disagreed with the Second District’s explanation that “a covered peril can usually be found somewhere in the chain of causation…,” because had this ruling not been quashed, there could have been negative ramifications for insurance carriers.

While Sebo, seemingly expanded coverage for insureds and set forth guidance as to which legal doctrine of relief is applicable to various fact patterns, it did not clearly address the power of anti-concurrent policy language nor what the outcome of Sebo may had been if there had been an anti-concurrent clause. Instead, the court briefly scratched the surface as that was not the primary issue. On May 13, 2020, The Third District Court of Appeal shed light on this very issue, though, in its ruling in Security First Insurance Company v. John Czelusniak, 2020 WL 2463762 (Fla. 3d DCA 2020).

Czelusniak presents similar facts as set forth in the Sebo case. The insured, John Czelusniak filed suit against his insurance carrier, Security First Insurance Company. The insured sought coverage under his “all risks” policy of insurance for a loss that occurred as a result of the intrusion of water entering the property through the walls, windows and doors. Here, just as in Sebo, the loss was the result of a covered loss and excluded loss. The policy covered water entering through the door but excluded water that entered through the wall and windows. As such, the trial court applied the Concurrent Cause Doctrine and entered a directed verdict in favor of the insured, thereby determining that there was coverage for his claim. The trial court narrowly viewed the issue as one covered peril and one excluded peril, thereby aligning it with the very definition of the Concurrent Cause Doctrine. However, the Third District Court of Appeal found that the court erred in utilizing the Concurrent Cause Doctrine because the trial court essentially disregarded the language of the insurance policy. The court explained that the relevant policy which was the subject of the suit contained an anti-concurrent clause in the insurer carrier’s water damage exclusion endorsement.

The water intrusion through the walls or windows was expressly excluded, regardless of any other contributing event. As such, the court held that, “anti-concurrent cause provision, coupled with the undisputed evidence that the loss was caused by a combination of both excluded and covered perils, foreclosed the analysis of whether the jury could legally or factually separate the damage caused by water coming through the door from water coming through the walls and windows.” Accordingly, the decision was reversed and remanded.

Specifically, the court, citing Sebo, ruled that, “when independent perils converge and no single cause can be considered the sole or proximate cause, it is appropriate to apply the Concurring Cause Doctrine.” However, when the insurer explicitly avoids the application of the Concurring Cause Doctrine with an anti-concurrent cause provision, the plain language of the policy precludes recovery.” Simply put, an anti-concurrent clause within an insurance policy essentially provides that, regardless of whether the loss is a result of both excluded and covered perils, the loss will not be covered.

Unlike in Sebo, the insured in Czelusniak was issued a policy of insurance that contained a plain written anti-concurrent clause. Security First’s Water Damage Exclusion endorsement specifically indicated:

1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss: . . .

c. Water Damage, meaning: . . .

(6) Water penetration through the roof system or exterior walls or windows. . . .

Since this policy language existed, the court found that the trial court erred in granting the insured’s directed verdict. The analysis in Czelusniak would not follow the exact analysis set forth in Sebo due to the existing anti-concurrent clause.

Essentially, while Sebo focused on which legal doctrine of relief is proper when more than one peril is a contributing factor to a loss, Czelusniak sheds light on the way in which the loss, albeit involving both a covered peril and an excluded peril, can still be determined to potentially be precluded from recovery. Czelusniak reminds insurance carriers of the power of the policy itself, and being strategic when writing these policies.

Future cases will likely seek to refine the rules regarding anti-concurrent and exclusionary provisions.

*Kayla Barnett is an associate who works in our Fort Lauderdale, Florida office. She can be reached at 954.832.3966 or klbarnett@mdwcg.com.

_{Defense Digest, Vol. 26, No. 3, October 2020 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2020 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}